After helping clients with their financial, estate and retirement planning, advisors often have a strong relationship with their clients. That puts us in a unique position to discuss succession planning with those clients who are also business owners.

In many cases, we’ve already implemented plans or products to protect their assets and the value of their businesses. And we usually have detailed knowledge of their operations and, hopefully, of their visions and goals. It’s the next natural step to assist them in planning for succession.

Many emotional roadblocks can hinder and delay a client when taking the plunge into the succession-planning arena. And many wait until it’s too late and are forced into an unplanned, and sometimes ill-conceived, succession plan.

It’s incumbent on advisors to introduce and push the issue, so wecan help our clients address succession planning at the appropriate time in their business lives.

Unfortunately, many business owners do not plan for succession at all. One in four small- to medium-size business owners in Canada over the age of 50 plan to exit their business in the next five years, according to a Quantitative Study of the Business Succession Market in Canada, published by RBC Royal Bank. However, 77% of those owners do not have a succession plan in place. Owners with larger businesses – those with revenues of over $5 million – are slightly better prepared, but still, 50% in that category have made little or no progress in formulating a business plan.

In most situations, a detailed business plan will be beneficial for both the owner and the advisor: it helps the business owner create a seamless transition that provides comfort for both customers and employees, and a well-crafted plan will also help enhance the strategic direction of the business, ensure continuity and maintain or enhance the value of the business.

Nearly all succession plans will involve valuations, retirement and estate planning and financing arrangements. And we are in a pivotal position to not only help construct the plan, but also to provide resources and access to the products required to implement it.

An advisor should be part of the overall succession planning team – a team that usually consists of lawyers, accountants, business valuators, family members, the company’s management team and various other advisors.

If the business has assets outside of Canada, advisors with expertise in cross-border planning might also be required. Insurance advisors and investment counsellors would usually be called on to provide their expertise and seek out the right products or investments. Each member of the team plays a specific role, but in many cases, the client’s primary financial advisor is the one with knowledge of all the related disciplines, and in the best position to quarterback the team.

In order to get your clients to start thinking about their succession plans, it’s best to formulate a series of questions for them. These questions should deal with timing issues, such as when they would like to retire and what retirement would look like for them. These help start the conversation, and the next step is to get them thinking about not running the business one day. That can be a hard leap for some business owners to make. More detailed questions – such as whether family succession is feasible, or whether a sale to employees is more likely – would follow. But broaching the issue is critical. As advisors, it’s a great way to add value and demonstrate that we are looking out for our clients’ best interests – not only in the present, but into the future as well.


  • David wm. Brown, CFP, CLU, Ch.F.C., RHU, TEP, and a member of the MDRT. He is a partner at Al G. Brown and Associates in Toronto.


    Originally published on Advisor.ca